Online Social Networking Industry
The concept of social networking as a platform for engaging a community is distinctly not novel. What is novel is how technology has facilitated the evolution of virtual social platforms that broaden the reach, ability and latent of community (Web 2.0 in Social Networking sites Industry Analysis, 2009). The new emerging technologies are invariably altering the means through that consumers can interact with each other.
Previously, the main technology used by consumers for communicating was telephone but throughout the 1980’s and the 1990’s, personal computers and the Internet vastly broadened the choices accessible for consumers to intercommunicate with each other with services like email, chat rooms, online bulletin boards, instant messaging etc.
The Online Social Networking Industry constitutes companies that are attempting to navigate, analyze, or display social associations of friends, co-workers and acquaintances. The online social networking industry is developing quickly with a kind of both personal and business tailored applications rising tapping into the global marketplace (Web 2.0 in Social Networking sites Industry Analysis, 2009). The more advanced features of the industry players allow weak links and friend-of-a friend links to be tapped for social or business networking aims.
Porter’s Five Force Analysis of Social Networking Industry
Online Social Networking firms extend quite a few variations of the products on the basis of their target audience and the aim of the product. Some firms concentrate primarily on one aspect whereas other firms may incorporate all of these offerings and some of these offerings:
- Business Network Building
- Business Network Searching
- Social Network Building
- Social Network Searching (George, 2003).
Usually, the Network Building firms of the industry offer a search potential, whereas the Network Searching firms have concentrated on assembling Internet-based information from public informants or clients. The position and the attractiveness of the industry would be considered effectively with the help of its porter’s five force analysis that is as follows;
Threat of New Entrants:
A number of players are entering the industry with an aim to grow and attain a prominent position but still the industry is dominated by few social networking players. The network effects of the companies are not assisting them in retaining their market share. More and more companies are entering but only some of them are able to attain a specific position and in this way, it could be said that the threat of new entrants in the industry is moderate.
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The prominent buyers of the social networking industry players are advertising companies and the subscribers of “premium services”. The power of industry service buyers is high as the advertisers and the premium users may also get the same services from other social networking sites at more effective prices (Yang, Kim & Dhalwani, n.d.). The switching costs are very low and due to this the buyers easily get switch to different providers.
In the online social networking industry, the main supplier to a social networking site is the visitors who visit social networks. The importance of visitors as suppliers is due to the determination of visitors that how attractive the site is to likely advertisers. In contrast, other kinds of suppliers that provide the server hardware, software, or network bandwidth to the site play a comparatively less important role. In this way, it could be said that the power of suppliers in the industry is low.
Threat of Substitutes
The threat of substitute products or services is moderate in the industry as in present all are trying to come up with something new and innovative. The prominent players in the industry are few and due to this the threat of substitute products and services is not so high (Yang, Kim & Dhalwani, n.d.).
A number of online social networking sites have been launched, since the concept had emerged and employed. More and more companies are trying these products and services that demonstrate that the rivalry in the industry is very high.
Assessment of Industry’s Overall Attractiveness & Key Success Factors
With the Porter’s five force analysis of the industry, it could be stated that the overall attractiveness of the industry is moderate and as soon as the technology will be developed more and more industry players will become more lucrative. The attractiveness of the industry could be analyzed with the example of some famous social networking sites like MySpace, Face book, Orkut and Twitter.
All these social networking companies had attained their position in the global market place with the help of effective strategies and continuous improvement and innovation with their sites. The most effective key success factors for a social networking website are as follows:
- People-to-people interaction
- Speed of innovation
- Network effects
- Availability of Applications
- User engagement (Web 2.0 in Social Networking sites Industry Analysis, 2009)
Competitive Environment of Industry & Company Long-term Goals
With this detailed analysis of the industry, the determination regarding the company’s long-term goals can be made easily. The long-term goals of the company in concern to social networking web sites should be the continuous improvement and innovation with its social sites so that users can get benefits of latest technology and effective intercommunication (Xu, Tjoa & Chaudhry, 2007). Only with these long-term goals, the company can attain a significant position in the industry as the competition is increasing day by day in the industry.
More and more companies are trying to offer new and innovative features to its users with the help of their social networking sites. In the end of the discussion, it could be said that the company should operate in the industry with the overall objective of be creative and engaging more and more users with effective network effects and applications.
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